Is Apple Saving To Take Itself Private?

You cannot turn on a business show or leaf through a journal and not encounter some type of discussion on what Apple (NASDAQ: AAPL) should do with its outsize accumulation of cash and equivalents. Some type of shareholder distribution is the most popular wishful speculation so far. Even your cousin Wally's blog ponders when the company will, finally, give up and pay a dividend.

With shares breaching the now-famed $500 mark, recommendations to Apple are reaching such a fevered pitch, the company's ears must be getting awfully red. The elevated price has now introduced another prominent suggestion, a stock-split, as the company now becomes too expensive for many investors to hop on (the ones not well-versed on option, at least).

Let us ponder both of these suggestions and their respective merits.

A dividend would be welcome news on any shareholder. In general, dividends fulfil many functions. Typically, they are rewards a company dishes out to stakeholders who stick to a company through thick and thin. It may be a strategically disseminated signal to shareholders and the public that the company is doing really well, and has already availed itself of any worthy investment opportunity. It may also be a security measure against hostile takeovers taken with an eye on the company's liquid assets. Indeed, a dividend does many things.

None of which are needed at Apple at the moment.

Why should Apple's shareholders be rewarded? A relative handful holding the stock since the days when Job was persona-non-grata excluded, most current shareholders (a great many of them arguably brand new) are opportunistic plays acting on the company's excellent fundamentals. I would think a four-thousand percent historical return on equity, 25 percent since October alone, is reward enough to anyone.

Equally, it seems the company has no issues acting on any investment opportunities along the way, having snapped, in the last handful of months alone, a couple of small but promising companies providing solutions that complement its business model. And hostile raiders would be better served to attempt taking over Greece (the country!) before even thinking of ambushing Apple.

So the dividend is out. What about the stock split?

The company could be split five ways and still end up a comparatively expensive stock to many investors. But even before that consideration, what would a split get Apple? The company not an IPO, after all, and has no tangible benefits to its stock getting into more hands.

To the contrary, a stock split would enable a lot more people to weigh in with their wallets, but not necessarily much common sense, on what Apple should do. Remember the stock taking breaks on the downside following the “disappointment” that the iPhone 4S was decried to be?

Apple likes to have crowds telling it what they would like it to do just as much as Steve Jobs liked customers dictating what should be on Apple products. The next batch of investors to sell off shares and cry their proverbial eyes out on why iThis left 5 or 6G out or iThat has the wrong generation of Bluetooth may well have the company seriously evaluating the wisdom of having public shareholders at all.

As that cash reserve gets higher, I would not put it beyond Apple to buy its own shares back.